Backing
businesses
tosucceed
Funding Circle Holdings plc
Annual Report and Accounts 2023
Funding Circle Holdings plc Annual Report and Accounts 2023
Our mission
Business owners are forward thinkers. They’re determined. They stand up to
make a difference and work hard to make it happen. That’s why our mission is
to help them get the funding they need to win.
Small businesses are the engine
room of the global economy.
We’rethe small business finance
provider that backs them to succeed.
Vikentijs Gubskis
8 Rocks Deli & Wine
8 Rocks café and
wine bar wanted
to reinvent their
business after
lockdown. Find out
how FlexiPay gave
them the support
they needed to grow.
Joe Faulkner
and Inas Sid
15 Grams
Hear how this coffee
shop and roastery
used their loan to
expand and open
a second site and
grow their online
customer base.
Laurence Dixon
Bass Place
London’s busiest
double bass
workshop needed
funding for some
roof repairs – and
their high street bank
couldn’t help. Here’s
how we were able to
support them.
Bruna Piaui Graf
Bruna’s Brazilian
Cheese Bread
In 2019, Bruna made
the decision to
follow her dreams
of offering the real
Brazilian cheese
bread experience.
Watch the
video online
Watch the
video online
Watch the
video online
Watch the
video online
The financeprovider
that’s all in
Contents
Strategic report
01 Highlights
02 Funding Circle at a glance
04 Why Funding Circle?
06 Chair’s statement
08 Chief Executive Officer’s statement
10 Our market
12 Our business model
14 Our technology and data
16 Our products and services
18 Our strategy
20 Key performance indicators
22 Environment, social and
governance (“ESG”)
31 Task Force on Climate-related
Financial Disclosures (“TCFD”)
41 Other commitments and
policy statements
42 Engaging our stakeholders
45 Financial review
52 Risk management
56 Principal risks and uncertainties
64 Viability statement
Corporate governance
67 Introduction from the Chair
68 Board of Directors
70 Corporate governance report:
Key Board activity
Board effectiveness review
81 Report of the Nomination Committee
84 Report of the Audit Committee
90 Report of the Risk and
Compliance Committee
92 Report of the ESG Committee
94 Directors’ remuneration report
106 Annual report on remuneration
117 Report of the Directors
120 Statement of Directors’
responsibilities in respect of the
financial statements
Financial statements
122 Independent auditors’ report
129 Consolidated statement of
comprehensive income
130 Consolidated balance sheet
131 Consolidated statement of changes
in equity
132 Consolidated statement of cash
flows
133 Notes forming part of the
consolidated financial statements
179 Company balance sheet
180 Company statement of changes
in equity
181 Company statement of cash flows
182 Notes forming part of the Company
financial statements
191 Alternative performance measures
192 Glossary
195 Shareholder and Company
information
196 Company information
The Strategic Report was approved by the Board on 14 March 2024.
Lisa Jacobs
Chief Executive Officer
Our performance
Operational
Loan originations
£1.5bn
2022: £1.4bn
FlexiPay transactions
£234m
2022: £59m
Highlights
Statutory financial
Total income
£162.2m
2022: £151.0m
(Loss)/profit before tax
£(33.2)m
2022: £(12.9)m
Loans under management
Loans under management
£3.3bn
2022: £3.7bn
FlexiPay balances
£56m
2022: £18m
Alternative performance
measures (“APM”)
AEBITDA
£(3.9)m
2022: £9.5m
Net Assets 2023
£246.8m
2022: £284.0
Borrow, pay andspend
5 £16.9 billion credit extended
globally to more than 150,000
SMEs since 2010
5 Launched FlexiPay
card in the UK
5 Awarded a licence to
participate in the US Small
Business Administration’s
7(a) small business loan
programme, subject to
SBA approval
Powered by data
andtechnology
5 80% of applications in
the UK receiving instant
decisions
5 Application in six minutes,
decision in as little as
nine seconds and money
in borrower’s account in
24 hours (UK)
5 Strong customer satisfaction
with Group NPS at
79 for 2023
Executing on
medium-term plan
5 Attract more businesses
— including the second
year of sponsorship with
Premiership Rugby
5 Say yes to more businesses
— including lending via
Marketplace
5 Become #1 in new products
— including the launch of
FlexiPay card which enhances
the FlexiPay proposition
Solid performance in
line with expectations
5 Total income of £162m;
AEBITDA loss of £3.9m
5 Loan returns remain robust
and attractive
5 Continued to execute on
multi-product strategy
5 Go forward focus on
profitable UK business
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Funding Circle Holdings plc | Annual Report and Accounts 2023 01
Funding Circle at a glance
We back
businesses to
help them grow
At Funding Circle we understand how important getting
the right finance is for businesses to take their next
step. That’s why our mantra is to say “yes” to as many
businesses as possible.
What we do
Funding Circle is the finance provider that backs businesses to succeed, proudly raising the bar in the world of SME
finance with innovative products and services that support real businesses to go from strength to strength.
Business loans
Flexible commercial and
government-backed loans from
£10,000 to £500,000, available from
six months to seven years.
A suite of finance products to
support small businesses
Borrow
Working capital to help businesses grow, launch
new products or improve their operations.
Pay
Flexible cash flow finance to pay bills and
supplier invoices and make larger purchases.
Spend
Cover everyday business expenses, whether at
work or on the go.
FlexiPay
Short-term financing via
our FlexiPay line of credit
product, with a credit limit
of up to £250,000.
Marketplace
Merchant cash advance,
business loans and revolving
credit facilities from our
Marketplace lenders.
More detail on page 16
STRATEGIC REPORT
Funding Circle Holdings plc | Annual Report and Accounts 202302
How we do it
Our diverse product range is designed
specifically for SMEs as a priority, using
leading technology and data to provide
fast, fair and hassle-free finance.
Beyond great products, we know how
vital thoughtful customer service is.
We provide meaningful, human support
throughout to ensure every customer is
seen and heard.
Our ambition is to support as many
businesses as possible with the finance
they need to succeed, and to be a long-
term partner on their journey.
Where we do it
We’re delivering on our mission of helping small businesses get the
funding they need to win and have helped tens of thousands of
businesses across the UK and US.
An unrivalled experience
We deliver an unrivalled experience for
small businesses, powered by data and
technology.
2.5bn
data points in our data lake
6 min
application time in the UK
79
customer NPS for the Group
80%
instant decisions in the UK
4.6
Trustpilot score in the UK
United States
5 Funding Circle entered the US
market in 2013
5 Since then, we’ve helped more than
45,000 businesses access over
$4.8 billion in finance
United Kingdom
5 Founded in the UK in 2010, Funding
Circle is now the leading lending
platform for SMEs
5 We’ve helped more than
95,000 businesses access over
£12.5billion in finance
More detail on page 12
Attract more
borrowers
A
ccumulate
more data
De
velop better
machine learning
mo
dels
Say yes to
more
businesses
(increased
conversion)
G
reater
operating
le
verage
New products
(Funding Circle
and
Marketplace)
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Funding Circle Holdings plc | Annual Report and Accounts 2023 03
Our unique proposition
Strong progress on our medium-term plan across the business
Business profitable
£6.5m
PBT as most
established business
Maturity and scale evident
Business continued to grow
21%
originations growth in
FY 2023 vs FY 2022
Strong momentum
£234m
~4x growth in transactions
in FY 2023 vs FY 2022
FlexiPay card now fully
launched to new and
existing customers following
successful beta phase
Why Funding Circle?
UK Loans US Loans FlexiPay
We have built a unique proposition since the business was founded
in 2010 which has placed us in a strong position to deliver on our
strategic ambitions and serve more small business needs.
Leading SME lending platform in a
large and underserved market
5 >£330 billion term loans addressable market
opportunity, including £84bn in the UK
5 FlexiPay adds new market potential with
>£1.3 trillion SME B2B payments market
opportunity in the UK
Strong financial profile and
provenbusiness model despite
tough environment
5 Strong balance sheet and cash position
5 Established and profitable UK Loans business
Technology and data drive
superior customer experience
andcompetitive advantage
5 Group Net Promoter Score (“NPS”) of 79
and Trustpilot score of 4.6 stars
5 3x better risk discrimination than traditional
bureau scores, delivering high conversion
and attractive investor returns
Attractive growth opportunities
5 Focused on expanded distribution, increased
conversion and an expanded product set
5 Significant medium-term opportunities in
new products
More detail on page 12 More detail on page 18
More detail on page 14More detail on page 10
STRATEGIC REPORT
Funding Circle Holdings plc | Annual Report and Accounts 202304
Our strategic roadmap is
our platform for growth
Our medium-term plan is focused on delivering on our strategic
pillars supported by our core foundations, ESG strategy and the
values that our Circlers live and breathe every day.
Three strategic pillars
Three core foundations
Our values
Our ESG strategy
Obsess over
the customer
Climate change
and environment
Think smart
Diversity, equity
and inclusion (“DEI”)
Make it
happen
Social impact
Stand
together
Governance and
risk management
Be open
Live the
adventure
Start with the
customer: work
hard to serve
them, create great
experiences, and
build a trusting
partnership.
To support key environmental
initiatives where we can have
meaningful impact for Funding
Circle and its customers, and
achieve a good standard of
positive environmental impact
and progress towards net zero.
Find a better
way: challenge
assumptions, seek
insights, and make
informed decisions.
To be best in class and live by
our DEI statement, building an
inclusive and diverse culture.
Take small steps
fast and deliver:
be ambitious, take
accountability,
and see it through
with grit.
To support a diverse SME
customer base: creating jobs,
fostering financial inclusion,
having a positive impact and
providing opportunities, whilst
having a multiplicative effect on
the wider community.
We win and lose
as one team:
celebrate diversity,
listen actively, and
support each other.
Build trust through
transparency and
integrity: be honest,
seek feedback, and
communicate
clearly.
To meet shareholder and
investor expectations, and be
viewed positively in the market.
Champion our
culture: show
curiosity, embrace
change, and
bring your passion
every day.
More detail on page 19
More detail on page 19
More detail on page 22
More detail on page 25
Attract more
businesses
Strengthening existing
distribution channels and
expanding into new embedded
and intermediated channels
to enable more businesses
to reach us.
Say yes to more
businesses
Serving more businesses
through an expanded set of
personalised Funding Circle
products and further integration
with third party lenders.
Become #1 in new
products
Using our capabilities to
enter new markets where
we can develop market-
leading products.
Technology and data to
enable innovation at pace
Investing in our technology
and ever-expanding data lake
to deliver superior customer
service and better meet the
needs of SMEs.
Scalable products
and processes
Serving more businesses
through an expanded set of
personalised Funding Circle
products and further integration
with third party lenders.
High performing teams
executing brilliantly
Investing in our people and our
culture to make our business
stronger and deliver on
our strategy.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Funding Circle Holdings plc | Annual Report and Accounts 2023 05
Chair’s statement
Delivering against medium-term plan
In 2022 we set out our medium-term
plan to become a multi-product
platform that enables SMEs to borrow,
pay and spend with Funding Circle.
I am encouraged that we continued
to make good progress against this
strategy last year, which will enable
us to reach more SMEs and add
additional paths to grow our business.
Solid performance in a
challenging year
A year ago, I ended my annual
statement by referencing the
challenging period of subdued
economic activity ahead. This
played out against the backdrop of
growing geopolitical uncertainty
and inflationary pressures,
which combined to take their toll
on economic growth. Despite
these challenges, we once again
demonstrated the resilience
of the business and our agility
in responding to the changing
economic environment.
Low business confidence and the
higher interest rate environment are
not the conditions in which small
business owners rush to take on
new borrowing, so it is encouraging
that we grew our loan originations
by 2% year on year and FlexiPay
transactions quadrupled in the same
period. We also further enhanced
our position as a market leader in
supporting government-backed
lending to SMEs via the third iteration
of the UK government Recovery Loan
Scheme. And our new short-term
credit product, FlexiPay, is growing
rapidly, with the launch of the new
card feature off to a promising start.
As a result, in spite of a tough
economic backdrop, our core UK
Loans business extended its track
record of profitability. The business
continues to go from strength to
strength, growing its leading market
share and it has now delivered 12
successive years of positive net
returns for lenders on our platform.
This position is testament to the
power of our technology, how we
utilise our unique data insights and
the Funding Circle brand.
Strategic Focus
The medium-term plan, with its focus
on serving our customers across
a broader range of products and
services, is very different from the
single product, multi-geography
strategy first adopted by Funding
Circle. The shift in strategy has been
logical and evolutionary: as we have
grown our customer base to 150,000
SME businesses and continue to
enjoy exceptionally high levels of
customer satisfaction and loyalty,
it makes sense to increase our
engagement with those customers
and to offer them more products. We
are pleased with the progress made
so far, and continue to believe this is
the right strategy for the business.
A track record of
delivering robust and
attractive returns
Andrew Learoyd
Chair
Thanks to all of our
Circlers who have
once again helped
to deliver another
solid set of results
in a difficult external
environment. This
has been a true
team effort, with
contributions from
every corner of
thebusiness.”
Our team in the US has played a
significant part in helping us to
execute against our three strategic
pillars. Most recently, the team was
awarded an SBA loan issuer licence
from the US Government, which is
subject to final SBA approval.
SBA issuance, however, requires a
different approach in terms of its
capital needs and other resource
requirements. This would leave
the US business with a materially
different profile to our UK operations.
As a Group, we have taken the decision
to simplify the business and focus
on a profitable UK business and
delivering shareholder value. We
have received early indications of
interest in the US business and will
provide an update in due course.
STRATEGIC REPORT
Funding Circle Holdings plc | Annual Report and Accounts 202306
Thanks to the team
Thanks to all of our Circlers who have
once again helped to deliver another
solid set of results in a difficult
external environment. This has been
a true team effort, with contributions
from every corner of the business.
As we look forward to 2024, there
will be some upcoming changes in
Board composition as some of the
Directors are nearing the end of
their tenure and to ensure we have
the right Board composition in place
for our revised strategy. It is my
responsibility to ensure a smooth and
effective transition, including for my
own role as Chair. Eric Daniels, who
has served on the Board for nearly
eight years, will not be standing
for re-election as a Director at the
Company’s AGM in May 2024. On
behalf of myself and the rest of the
Board, we’d like to thank Eric for his
dedication and commitment over the
years. The business has benefitted
from his expertise and experience
and we will miss his gravitas as well
as his humour.
An exciting year ahead
Our core business, already profitable,
has incredible operating leverage to
take advantage of any recovery in
the UK economy.
The decision to review our activities
in the US has been tough, after
many years of ownership and
investment, but I believe it is a
decision that is in the best interests
of delivering shareholder value
and simplifying the business.
We believe that our business is
fundamentally undervalued by
the public markets and by making
changes in the US we can maximise
the focus of management, our
resources and our investors in the
valuable core UK business and the
exciting opportunities of delivering
new products to our growing
customer base.
Andrew Learoyd
Chair
14 March 2024
Sip, sip, hooray,
with FlexiPay
Vikentijs (Vik) Gubskis
8 Rocks Deli & Wine
8 Rocks Deli & Wine, a café and wine bar in
Loughton, Essex, took out a government-backed
loan during lockdown to update their premises
and make it more functional as an all-day dining
location, providing the community with a deli by
day and a wine bar by the evening. However, Vik
still found managing cash flow a challenge when
having to order so much stock – so in April 2022,
he took out a FlexiPay line of credit to help.
Vik was one of the early tranche of customers
to be approved for a line of credit and, so far, he
has used the product to get a discount on their
bulk wine orders and to spread their everyday
costs. Vik tells us the benefits of having FlexiPay
on hand, and how our support has allowed his
business to grow.
Backing businesses
Watch the
video online
Funding Circle Holdings plc | Annual Report and Accounts 2023 07
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Chief Executive Officer’s statement
Delivering on our plan to
capture growth in a large,
underserved market
T
wo years ago, we set out
our medium term strategy
to transition into a multi-
product business, enabling
our customers to borrow, pay and
spend. I’m proud of the progress we
have made in achieving this strategy,
whilst also delivering results in line
with expectations.
Our UK business is in a strong
position. We’re the market leader in
online SME lending; we’re using our
technology and data advantage to
deliver a superior customer experience
and we’re launching new products
to further our mission of helping
more SMEs get the funding they
need to win. Our loan returns remain
attractive and robust, attracting
continued institutional investor loan
demand. Our UK Loans business
is profitable despite a stressed
credit environment and our FlexiPay
product has grown strongly and, as
a frequent use product, has enabled
us to build greater engagement with
our customers. I’m excited that we
launched our card product in 2023
– enabling customers to borrow, pay
and spend with Funding Circle in their
pockets for the first time.
We made steady progress in the
US and were the only fintech to
receive a tentative award for an
SBA 7(a) licence. We see good long
term growth opportunities in the
US market. However, future growth
will require significant cash and
capital under the SBA programme.
As a result, going forward we are
focusing on our UK business – the
combination of UK Loans and
FlexiPay – to drive Group cash and
profitability and to deliver greater
shareholder value. We have received
early indications of interest in the US
business from third parties and will
provide a further update on these
discussions in due course.
Financial and operational overview
Our financial performance in 2023
was in line with expectations, and
once again demonstrated the
resilience of the business and our
agility in responding to the changing
economic environment. We delivered
£162.2m total income and AEBITDA
loss of £3.9m, as we invested in the
US and FlexiPay. We ended the year
with a strong balance sheet – net
assets of £246.8m and unrestricted
cash of £169.6m.
During the year, we saw good
momentum in our two UK businesses
– UK Loans and FlexiPay. The UK
Loans business is profitable and
margins improved half-on-half, with
AEBITDA profit of £21.3m and PBT of
£6.5m, up from £13.8m and a loss of
£1.8m in 2022, respectively.
FlexiPay, our short term credit
product, delivered strong growth
in 2023, building on a successful
launch in 2022. Transactions
nearly quadrupled to £234m and
businesses FlexiPayed over 60,000
times. What I’m particularly excited
about is the repeat usage we see
– FlexiPay has quickly become an
important tool for our customers
to manage their biggest pain point,
cashflow management – enabling us
to see attractive recurring revenue.
Lisa Jacobs
Chief Executive Officer
We have a strong
team, a clear
plan and we’re
unwavering in
our mission to
help more small
businesses win.
We will continue
to deliver well
and maintain
our core focus
on transforming
our business into
something that is
more important
in our customers’
lives and more
valuable for our
shareholders.”
Our achievements this year are
testament to the hard work and
dedication of our fantastic Circlers
– thanks to all of them for their
commitment to helping SMEs
thrive. Our culture is something we
deliberately nurture and makes our
business special. It’s a pleasure to
work with such a great, diverse team
every day.
STRATEGIC REPORT
Funding Circle Holdings plc | Annual Report and Accounts 202308
Playing an important role in
businesses’ day-to-day lives
This year I was delighted to meet a
number of our customers including
Alexis Gauthier, a repeat Funding
Circle borrower and founder of
Gauthier Soho in London, and
Bruna Piaui Graf of Bruna’s Brazilian
Cheese Bread in Colorado. I continue
to be inspired by our borrowers’
entrepreneurship, creativity and
resilience. We play a small part in
these businesses’ lives, but it is an
important one – one that enabled
both Alexis and Bruna to expand
their business and realise their goals.
I know everyone at Funding Circle
is so proud that our credit products
can help make a difference for these
businesses – whether that’s through
working capital, a loan to fuel growth,
or providing a better means to
manage their cashflow with FlexiPay.
Looking ahead
We exist to help SMEs access the
funding they need to win. We do this
by delivering an unrivalled customer
experience powered by data and
technology. We are leveraging this
competitive advantage to diversify
and expand our products and
distribution channels to help the
hundreds of thousands of SMEs
who remain underserved by the
traditional financial services market.
We’re excited about the future of
our UK business. Our focus on the
UK will improve Group profitability
and cash generation over the nearer
term. We will continue to support
our businesses through wider
distribution, increased conversion
and an expanded product set, which
is underpinned by a robust balance
sheet and strong cash position.
We have a strong team, a clear plan
and we’re unwavering in our mission
to help more small businesses
win. We will continue to deliver
well and maintain our core focus
on transforming our business into
something that is more important
in our customers’ lives and more
valuable for our shareholders.
Lisa Jacobs
Chief Executive Officer
14 March 2024
Success is
brewing
Joe Faulkner and Inas Sid
15 Grams
In 2019, Joe and Inas opened their first 15 Grams
coffee shop and roastery in Greenwich, London.
Having seen immediate success, with many
people walking out for a coffee during lockdown,
the owners wanted to open a second site so they
could reach a wider customer base.
Through one of Funding Circle’s partners, Tide,
they were able to get the funds they needed really
quickly, allowing them to secure their second
shop in Blackheath, London, fund new equipment
and hire additional staff, as well as grow their
e-commerce subscription business. Hear their
story, and how funding has helped them expand
their business to new heights in the video below.
Watch the
video online
Backing businesses
Funding Circle Holdings plc | Annual Report and Accounts 2023 09
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Our market
Small businesses’
confidence returning after
years of uncertainty
SMEs: An important driver of the economy
It’s clear that SMEs punch above their weight when it
comes to powering the economy. Making up 99% of UK
businesses and 61% of private sector jobs, SMEs keep
our communities vibrant and our high streets lively. Based
on the results of our 2023 SME survey, Funding Circle’s
lending not only contributed £6.9 billion to the UK’s gross
domestic product (GDP) but also played a pivotal role in
supporting 95,800 jobs. Beyond employment and GDP
contributions, the economic activity supported by these
loans generated £1.6 billion in tax receipts.
Details of the impact report
can be found here:
UK market:
There are a range of challenges impacting SMEs,
including the highest base rate in 15 years, supply chain
issues and a slowing demand for goods and services.
Over the last few years, we have seen how SMEs have
responded to these challenges with specific behaviours
that emerged during the pandemic. These can be broadly
categorised into three groups:
5 Survivors — those most negatively impacted by
the economic environment;
5 Hedgers — those focused on precautionary
measures, such as building up or maintaining cash
reserves; and
5 Thrivers — those who continued to adapt, invest
and grow their businesses.
In the past year, the number of survivors remained
steady, and the size of hedgers and thrivers fluctuated
as businesses responded to the changing economic
conditions. As individuals and households felt the impacts
of the cost of living crisis and businesses responded to
base rate rises, business confidence, and therefore the
amount of thrivers, dropped in the middle of the year.
However, this group stabilised as the conditions eased
throughout the second half of the year.
SMEs are growing in optimism for the long term, with ONS
reporting a 11% rise in SMEs reporting no concerns for the
future of their business over the last year.
However, they’re still exercising caution in the short term,
with more hedgers holding off investment decisions
as they seek to maintain cash reserves in the face of
uncertainty. This is demonstrated by almost half of the
SMEs surveyed reporting they had paused, delayed,
or cancelled a business investment in 2023 due to
economic conditions. The proportion of SMEs expecting
to immediately increase investment in their business also
fell. The research shows SMEs prefer to wait for signs of
demand recovery before making investments.
Nonetheless, SMEs are clearly ready to unlock their
potential. We are pleased to see nearly half plan to
grow their business over the next year. Data from the
Federation of Small Businesses (FSB) supports this,
finding that the share of SMEs expecting to increase
investment over the next quarter towards the end of 2023
was in line with the 2022 level, indicating the cohort of
thrivers has remained stable.
SME confidence is finally on the rise
Overall, SMEs are powering our economies and
communities, and with the right support they are well-
placed to continue doing so. The FSB’s Small Business
Index (SBI) indicates an overall increase in business
confidence levels during 2023. Although economic
weaknesses seem to influence SME sentiment, more
SMEs are reporting no risk of insolvency compared to
equivalent levels last year. Funding Circle survey data
also indicates that 87% of small businesses feel more
optimistic or have neutral sentiments for their business
performance for the next 12 months, suggesting a
positive outlook for the UK economy. Not only this, they
are ready to invest when the opportunity arises, with
medium term growth ambitions rising.
SMEs access to finance is growing
Despite this, confidence can only get you so far.
Traditional credit conditions have tightened due to
monetary policy decisions and economic headwinds, but
this hasn’t stopped SMEs accessing finance.
SME confidence has increased across a range of metrics over the last year, but
support is needed to unlock the full potential of the UK’s small businesses who are
optimistic for growth once trading conditions ease and as and when demand for
goods and services recovers. Resilience is on the rise and businesses feel hopeful
for the future, as SMEs report an increase in sentiment towards long term success.
STRATEGIC REPORT
Funding Circle Holdings plc | Annual Report and Accounts 202310
Struck the
rightchord
Laurence Dixon
Bass Place
Bass Place, the home of double bass repairs in
London, was struggling to find funding for some
restoration works on their building, and their high
street bank of 30 years couldn’t help. Having heard
about Funding Circle through a relative, owner
Laurence decided to make a call to our team – and
had all the funds for the repairs four days later.
Laurence tells us all about his experience, what
else he used his loan for, and how finance has
helped him continue to restore some of the world’s
oldest instruments.
Our research shows the availability of credit to SMEs
in the UK has risen, with a 15% increase from Q4 2022
to Q4 2023. Much of this availability is a direct result of
alternative finance lenders like Funding Circle providing
finance that traditional lenders do not. Over two-thirds
(67%) of SMEs report that they believe traditional lenders
such as banks favour large, well-established businesses.
And brokers agree: a recent survey of UK finance brokers
indicated that 3 out of 4 (77%) of banks are now less
willing to lend to SMEs.
SMEs need simpler ways to access funding
Part of this problem lies in the complexity of data required
to make a lending decision which can be highly onerous
for the borrower. According to our 2023 borrower survey,
SMEs’ primary hurdle in accessing funding was the
borrowing process. This is also highlighted in data from
Open Banking Expo (OBE) that shows that 47% of small
businesses struggle to answer all the questions in loan
application forms. This is a big hurdle for SMEs, and our
survey shows that simplicity and speed are two of the
main reasons SMEs choose us.
The sector has also seen greater demand for, and
provision of, short-term financing including credit cards
and overdrafts, with the Bank of England reporting
business credit card demand doubling from 10% to 20%
in the last year. We launched FlexiPay, our short-term
finance solution, to help meet this growing customer
need. With over £1.5bn of funding distributed to SMEs
in 2023, we continue to evolve our range of products for
our customers to ensure they can access the finance
they need.
£6.9bn
contribution to GDP
95,800
jobs supported
£1.6bn
generated in tax receipts
Watch the
video online
Backing businesses
Funding Circle Holdings plc | Annual Report and Accounts 2023 11
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Small business borrower needs
Access to affordable finance
5 SMEs’ access to finance can be restricted
5 SMEs account for ~50% of GDP
but <2% bank lending
Fast, convenient applications
5 Instant automated decision in the UK for
80% of applications (six minute application;
decision in nine seconds; funding
in 24 hours)
5 Easy online applications in the US (six
minute application; decision in 24 hours;
funding in 48 hours)
Superior customer experience
5 79 Group Net Promoter Score
Institutional investor needs
Access to hard-to-reach asset class at
scale through diversified loan book of
multiple smaller loans
5 Diverse SME population
5 Wide-ranging and complex risks
5 Significant credit exposure
5 Fragmented and unpredictable data
Robust and attractive returns
5 6-7% average annualised returns
since 2018
5 Higher future returns targeted (higher base
rate environment)
5 Active monitoring to ensure institutional
investor diversification and performance
Our model creates
growthfor all stakeholders
Market inputs Our flywheel
Attract more
borrowers
Accumulate
more data
Develop better
machine learning
models
Say yes to
more businesses
(increased
conversion)
Greater
operating
leverage
New products
(Funding Circle
and Marketplace)
Our business model
We have 13+ years’ experience of delivering robust and
attractive returns to investors through a proven business
model whilst providing a superior customer experience.
STRATEGIC REPORT
Funding Circle Holdings plc | Annual Report and Accounts 202312
Borrowers
Access to fast, flexible, affordable finance with
an unrivalled customer experience.
Institutional investors
Exposure to an attractive, hard-to-access asset
class of strategic importance to the economy.
Communities
A big impact in communities where small
businesses create jobs, fuel economic growth
and generate tax receipts.
Government and regulators
A trusted and reputable company, working
alongside regulators, industry and institutions
to ensure best practice.
Partners and suppliers
A dependable partner and customer, working
towards a common goal wherever possible.
Employees (Circlers)
A culture of diversity, equity, inclusion and
opportunity, dedicated to learning and personal
growth in a high performance environment.
Shareholders
An attractive opportunity for sustainable
shareholder value creation.
Growing data lake
Contains 2.5 billion data points, including proprietary
data gained from over 13 years of SME lending
which includes over 1.7 million loan applications and
behavioural and performance data from over 200,000
loans and 80,000 FlexiPay transactions.
Models that outperform
Our data enables us to build and apply ever more
accurate and predictive risk models (now ninth
generation in the UK and fifth in the US) that outperform
traditional bureau scores by as much as three times.
These models outperform the traditional bureau scores,
but also enable us to be smart about the data we ask our
customers for, balancing risk insights with a frictionless
customer journey.
Instant decisions and increased conversion
The powerful combination of data and technology
enables us to make more instant lending decisions,
optimising borrower access to finance and improving
customer experience and conversion. Our data also
powers our marketing models, so we target those
businesses most likely to respond and to pass our
credit assessment.
Developing new products
Our data, our technology and our customers combined
enable us to launch more products. Offering more
products increases our customer engagement and builds
deeper relationships with customers, who return to us
for future finance and recommend us to others.
Value we createOur competitive advantage
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Funding Circle Holdings plc | Annual Report and Accounts 2023 13
Our technology and data
Technology and data
areattheheart of our
SMElendingplatform
Over the past 13+ years, our dedication to providing
SMEs with access to finance has equipped us with
rich, unparalleled data which is at the heart of our
business and underpins everything we do.
It is what we do with this constantly evolving and
expanding data, and how we combine it with our
powerful, advanced technology, that makes us unique
and allows us to solve more small business problems
through our range of financial products.
Since 2010, we have provided finance to 150,000
SMEs, assessed 1.7 million credit applications and have
behavioural and performance data from over 200,000
loans and more than 80,000 transactions through
our most recent product, FlexiPay. We combine our
proprietary data with publicly available sources to gain
an even broader knowledge of SMEs and, from over 13
years of gathering this data, our data lake now includes
2.5 billion data points. This has enabled us to build an
unparalleled picture of SMEs: their spending habits,
borrowing habits and payment behaviour and use cases
across different products.
We use the data we have at our fingertips in ways that
our competitors, including banks, don’t - this is what
differentiates us from our peers.
And this is just the beginning. The SME market is
large and typically underserved. Our unrivalled data
insights and technological advantage continue to
grow stronger as we scale, and, as we have shown
with FlexiPay, we are in a strong position to continue
to unlock this market and solve more small business
problems across other product categories.
Optimise
marketing
Our unmatched understanding of SMEs and latest
generation risk models - now ninth generation
in the UK and fifth in the US - help us to select
the right applicants for our products. We use
accurate targeting to attract and say yes to
businesses likely to want finance and likely to
be creditworthy.
Provide access to
finance, fast and
hassle free
Developed and refined over more than a decade
of lending to SMEs, our advanced machine
learning technology and instant decision
capabilities enable SMEs in the UK to complete a
lending application in six minutes and receive a
lending decision in as little as nine seconds.
Expand our products
By leveraging our unique data insights and
unrivalled technology, we are in a strong position
to deliver new products quickly and further
integrate with third party lenders to serve more
business needs with a better value proposition.
Generate repeatusage
Our excellent customer experience and user
journey ensure we not only attract new borrowers,
we generate repeat businesses from our existing
customers too.
Deliver strong and
robust returns
Through our careful customer targeting, we’re
able to optimise and increase conversion,
enabling us to ensure a good return on investment.
STRATEGIC REPORT
Funding Circle Holdings plc | Annual Report and Accounts 202314
150,000
businesses helped since
2010,globally
£16.9bn
lent to SMEs to date, globally
1.7m
applications to date, globally
2.5bn
data points in Funding
Circle data lake
>200,000
loans to date, globally
37m
businesses in Funding
Circle data lake
Rising high,
expanding wide
Bruna Piaui Graf
Bruna’s Brazilian Cheese Bread
Since moving from Brazil to the US in 2014, Bruna
longed for the traditional Brazilian snack, cheese
bread. In 2019 Bruna made the decision to follow her
dreams of offering the real Brazilian cheese bread
experience, and launched the company Bruna’s
Brazilian Cheese Bread.
Initially launching with a food truck, Bruna offered
delicious cheese bread at festivals and markets.
A year after launch, the pandemic impacted the
business, but Bruna didn’t give up and pivoted
by starting a frozen and bake at home selection,
as well as changing the packaging and venturing
to wholesale.
Whilst growing the business and taking it into
different directions, Bruna came to Funding Circle for
a business loan that helped her with the growth of the
business. For Bruna, it was a really simple and quick
process that has allowed her to focus on creating new
and delicious cheese breads, including vegan and
pizza flavoured options.
Watch the
video online
Backing businessesBacking businesses
Funding Circle Holdings plc | Annual Report and Accounts 2023 15
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Our products and services
Financial support that backs
businesses to succeed
We have a diverse and evolving product range that empowers
businesses to reach their goals.
FlexiPay UK business loans US business loans
A flexible credit line and
business credit card that allow
businesses to spread their
repayments in three
5 Interest-free line of credit with
no annual fees
5 Credit limit up to £250,000
5 Includes business credit card
5 Flat fee per transaction
5 Prime and near prime loans
5 From £10,000 to £500,000
5 Available from six months
to six years
5 Asset finance 5 Term loans
5 Revolving credit
facilities
5 Merchant
cash advance
5 Super prime, prime and near
prime loans
5 From $25,000 to $500,000
5 Available from six months to
seven years
Refreshingly simple and competitive loans designed for businesses
Marketplace
A service that opens the door to finance solutions from across the market
A suite of finance products to
supportsmallbusinesses
Borrow
Working capital to help businesses
grow, launch new products or improve
their operations.
Pay
Flexible cash flow finance to pay bills and
supplier invoices and make larger purchases.
Spend
Cover everyday business expenses, whether at
work or on the go.
STRATEGIC REPORT
Funding Circle Holdings plc | Annual Report and Accounts 202316
FlexiPay: payments on your terms
We’ve heard countless businesses tell us they want more support and options in how they manage their finances and
more flexible and simple payment terms - that’s why we created FlexiPay.
With FlexiPay, businesses choose how to access their funds - they can either make a simple transfer to pay a supplier
or bill, or use the FlexiPay card for purchases online or in store, then choose which payments to pay off in full, or spread
the cost over three manageable instalments with a flat fee and 0% interest. FlexiPay enables businesses to pay urgent
bills quickly, keep suppliers happy with early payments and seize new business opportunities in the moment.
Marketplace: opening doors to finance solutions from across the market
Our Marketplace service enables us to say yes to more businesses by finding the right deal for customers we are
unable to support with our existing product range. Through Marketplace, businesses can access a wide range of
finance products from our partners whilst benefitting from the speed and efficiency provided by Funding Circle’s
market-leading technology.
In 2023, Marketplace continued to show strong momentum in helping more businesses access the finance they need.
During the year, more than £100 million was lent through Marketpla